Suppose the average demand was five. If the firm kept five units in stock and if the demand actually *was* five, the cost would be zero because there is no penalty. When I falsely claim in class that zero is therefore the *average* cost, nearly all of my university and executive education students dutifully nod their heads in agreement.

But the graph of operating cost versus demand (Figure 32.1) makes it clear that a deviation of demand either way from the average of five results in a penalty, so average cost must be greater than zero. But how much greater?

We need the distribution of antibiotic demand to find out. Suppose that demand fluctuates from month to month with no systematic seasonality. Then Figure 32.2, the histogram of 36 months of ...

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